Tashkent, Uzbekistan (UzDaily.com) - From 1 April 2020, according to innovations in tax legislation, the income tax exemption for individuals who received assistance from charitable foundations was canceled.

However, by the Decree of the President of the Republic of Uzbekistan “On priority measures to mitigate the negative impact on the economy of the coronavirus pandemic and global crisis phenomena” No. UP-5969 of March 19, 2020, the Ministry of Finance of the Republic of Uzbekistan was instructed to submit to the Cabinet of Ministers a draft law on amendments to the Tax Code, providing for the introduction of benefits in the form of exemption from 1 April 2020 from taxation of the income of individuals received in the form of material benefits from charitable organizations.

Changes in tax legislation also affected the taxation system of companies providing charitable assistance.

So, from 1 April 2020, the exemption for legal entities providing assistance to charitable foundations - for income tax - is canceled.

Previously, such enterprises could reduce taxable profit by the amount of funds allocated to charitable foundations by no more than 2%, the rest of the amount spent could not reduce the amount of profit subject to tax.

For example, in 2019, an enterprise with a profit (income minus expenses) of 100.0 million soums spent 5 million soums on charity.

It could reduce taxable profit only by 2 million soums (2% of the tax base), and, accordingly, not 95.0 million soums, but 98.0 million soums were subject to income tax.

This year, the enterprise cited in our example, regardless of the amount of expenses incurred for charity, will pay tax on all profits without the right to reduce the payment by the amount of charity.

The practice of such countries as the Russian Federation, Azerbaijan, Belarus, China shows that the transition to direct financing of social spheres is more effective and transparent than the provision of tax deductions.

This approach is characterized by defining the main goal of charitable activity - providing assistance, and not the benefit of tax incentives and deductions. The government of these countries makes recommendations on the implementation by taxpayers of charitable donations from their net profit.

Uzbekistan, like hundreds of countries around the world, due to the coronavirus pandemic, has a negative impact on the economy of global crisis. We hope that entrepreneurs will correctly interpret the revision of tax benefits for charitable activities, which are inextricably linked to the burden on the State budget due to an increase in health expenditures by 22.7% (14.8 trillion soums in 2020 compared to 12 trillion soums in 2019) and the transition to direct support for vulnerable groups.